Europe’s richest man Bernard Arnault on Monday made a $14.5bn (£11.3bn) bid to buy Tiffany & Co, the jeweller famed for its extravagant engagement rings and white diamond necklaces worn by the likes of Audrey Hepburn for the film Breakfast at Tiffany’s.
Arnault’s €194bn (£167bn) LVMH luxury goods empire, which features brands such as Louis Vuitton, Dior and Moët & Chandon, announced it had made a $120-a-share offer to buy the US jeweller, which was founded by 25-year-old Charles Lewis Tiffany in 1837.
Tiffany said it was carefully reviewing the proposal, but said it was not in discussions with its Paris-based suitor, which it mistakenly referred to as LMVH in its statement. Tiffany employs more than 14,000 people, and operates about 300 stores around the world including its flagship store next to Trump Tower on Fifth Avenue. The shop, where Hepburn’s Holly Golightly character mused “nothing very bad could happen to you”, is undergoing a $250m refit.
News of LVMH’s approach sent Tiffany’s shares soaring by more than 30%, far above the offer price, as analysts predicted the jeweller would hold out for a higher price. Tiffany engagement rings range from £1,425 for a platinum band to £43,400 for a double-halo ring with pink diamonds, while other items include a $135,000 gold and silver chess set and a $1,500 paper clip bookmark. Its most treasured item, the $30m 128-carat yellow Tiffany diamond, was worn by Hepburn for Breakfast at Tiffany’s publicity shots for the film and was worn at the 2019 Oscars by Lady Gaga.
In a two-sentence statement LVMH, which is already the world’s largest luxury goods company, confirmed it “has held preliminary discussions regarding a possible transaction with Tiffany”, but refused to comment further.
If the deal goes ahead it would be LVMH’s biggest takeover under the 32-year reign of its chairman and chief executive, Arnault, a 70-year-old Frenchman who has built up a vast portfolio of luxury names at LVMH including Bulgari, Givenchy and Céline. It also already owns the watch brands Hublot and TAG Heuer.
Arnault has a $97bn fortune – almost twice as much as the second-most wealthy person in France, Françoise Bettencourt Meyers, according to the Bloomberg billionaires index.
Analysts said the proposed deal is part of a wave of consolidation in the industry, as the world’s biggest luxury goods groups compete to buy up brands that they hope will appeal to younger people and increasingly high-spending Chinese consumers.
Rogerio Fujimori, an analyst at The Royal Bank of Canada, said: “Hard luxury [watches and jewellery] is the only subsector where LVMH is not the leader (and we know that Mr Arnault likes to be always No 1).
“Jewellery is the least-crowded category in the sector, with only a handful of truly global players, and Tiffany has a proven brand equity in Asia, where it has consistently ranked among the top three jewellery brands in our Chinese consumer surveys over the years.”
The luxury goods sector is worth about £795bn, according to experts at Boston Consulting Group (BCG), who expect it to grow at up to 5% a year until at least 2025. Wealthy people in China, whose numbers recently eclipsed those in the US for the first time, are described as the “driving force” in the sector, accounting for a third of all spending. By 2025, that figure is expected to rise to 40%.
Tiffany is already exploiting the rise in Chinese spending as its US customers rein theirs in. Tiffany’s chief executive, Alessandro Bogliolo, said earlier this month that the company had moved some of its most expensive pieces, including diamond necklaces valued at more than $1m, from the US to mainland China. “We follow our customers where they shop,” he said.
A lower Chinese domestic sales tax introduced by the government to “repatriate consumption” by its citizens led to a double-digit decrease in sales to Chinese tourists in Tiffany’s US stores.
“LVMH’s attempt to put a $14.5bn ring on Tiffany, having already added Bulgari a couple of years ago is likely to take the fight in this sector to its closest rival Richemont, who owns Cartier, and would help LVMH in gaining better access to US markets,” said Michael Hewson, chief market analyst at spread-betting firm CMC Markets UK.
Rival luxury goods company Kering Group, which is run by the French billionaire François Pinault, owns Gucci and Saint Laurent. While Richemont, which was founded by the South African billionaire Johann Rupert, owns Cartier and Montblanc, and recently bought the Italian jewellery house Buccellati from the Chinese investment group Gangtai.
Analysts at the investment bank Jefferies said: “Tiffany is potentially the biggest prey and the only US global luxury brand … If a bid at this level, or indeed higher, was confirmed, it would be the largest M&A [mergers & acquisition] transaction to date for LVMH but one it could comfortably afford.”
They noted that in 2011, LVMH approached and acquired Bulgari in a similar manner, over the weekend. It went on to pay a 60% premium on Bulgari’s share price before it made its first offer. The offer for LVMH represented a 22% premium on Tiffany’s closing share price on Friday.
Under Bogliolo’s leadership, Tiffany is trying to appeal to younger people with more modern takes on jewellery, and this year launched a men’s collection. It is also increasing its marketing of engagement and wedding rings to same sex couples.
“Nowadays, the road to marriage is no longer linear, and true love can happen more than once with love stories coming in a variety of forms,” the company said when it launched the same-sex couples campaign in 2015. “The Tiffany engagement ring is the first sentence of the story that a couple will write together as they create a life that is deeply intimate and exceptional, which is the message we hope to convey through this campaign.”
LVMH, which made record sales of €46.8bn in 2018, opened a factory this month in Texas which was officially inaugurated by Donald Trump and his daughter Ivanka.
